Correlation Between YG Entertainment and PLAYWITH

Can any of the company-specific risk be diversified away by investing in both YG Entertainment and PLAYWITH at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining YG Entertainment and PLAYWITH into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between YG Entertainment and PLAYWITH, you can compare the effects of market volatilities on YG Entertainment and PLAYWITH and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in YG Entertainment with a short position of PLAYWITH. Check out your portfolio center. Please also check ongoing floating volatility patterns of YG Entertainment and PLAYWITH.

Diversification Opportunities for YG Entertainment and PLAYWITH

0.72

Correlation Coefficient

YG Entertainment  PLAYWITH

Poor diversification

The 3 months correlation between 122870 and PLAYWITH is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding YG Entertainment and PLAYWITH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYWITH and YG Entertainment is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on YG Entertainment are associated (or correlated) with PLAYWITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYWITH has no effect on the direction of YG Entertainment i.e., YG Entertainment and PLAYWITH go up and down completely randomly.

Pair Corralation between YG Entertainment and PLAYWITH

Assuming the 90 days trading horizon YG Entertainment is expected to generate 1.17 times more return on investment than PLAYWITH. However, YG Entertainment is 1.17 times more volatile than PLAYWITH. It trades about 0.26 of its potential returns per unit of risk. PLAYWITH is currently generating about 0.11 per unit of risk. If you would invest  4,515,000  in YG Entertainment on December 27, 2024 and sell it today you would earn a total of  2,055,000  from holding YG Entertainment or generate 45.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

YG Entertainment  vs.  PLAYWITH

YG Entertainment

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in YG Entertainment are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, YG Entertainment sustained solid returns over the last few months and may actually be approaching a breakup point.

PLAYWITH

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYWITH are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PLAYWITH sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YG Entertainment and PLAYWITH

The main advantage of trading using opposite YG Entertainment and PLAYWITH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YG Entertainment position performs unexpectedly, PLAYWITH can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in PLAYWITH will offset losses from the drop in PLAYWITH's long position.

The idea behind YG Entertainment and PLAYWITH pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.